Sunday, March 8, 2020

Overview of Various Taxes and Duties

Corporate Income Tax is discussed in our earlier post. 

Personal Income Tax (PIT) 

Income tax provisions can be found in the Income Tax Ordinance 1984, the Income Tax Rules 1984 and all relevant notifications under the Ordinance. In addition to payment of tax at a specified rates, an individual is supposed to pay a surcharge if he/she has net wealth exceeding BDT22.5 million as shown in the statement of assets and liabilities. The surcharge is calculated on the amount of tax payable after deduction of investment rebate. An individual that has net wealth exceeding BDT22.5 million shall pay a surcharge.

Value Added Tax 

VAT is imposed on goods and services at the stages of import, manufacturing, supply, and trading. VAT is imposed on services provided in Bangladesh and also on the services rendered from outside Bangladesh. A uniform VAT rate of 15 per cent is applicable for both goods and services. A registered VAT taxpayer is entitled to claim back the VAT paid on purchase of inputs subject to compliance with the provisions of VAT laws. 15 per cent VAT is applicable for all business or industrial units with an annual turnover of BDT8,000,000 and above, except in the cases specified in VAT laws. Turnover tax at the rate of three per cent is levied where annual turnover is less than BDT8,000,000. Truncated rate also applies in the cases specified by VAT laws which have been determined on the basis of assumed percentage of value addition. A taxpayer paying VAT at the truncated rate will not be entitled to claim input VAT rebate. Under the 2015-16 budget, the tax is reduced to 0.1 per cent of turnover for the first three years for industrial undertakin.

Supplementary Duty (SD) is applicable as per the 3rd Schedule of the VAT Act, 1991, at the rates specified for particular goods or services. Exemption of VAT or imposition of VAT at zero per cent is regulated by Section 3 (Export or Deemed Export), Section 14 (goods/service declared by the government), 1st and 2nd Schedule of the VAT Act, 1991

Customs duty

Bangladesh levies customs duty on imports using the Harmonised Tariff System for tariff classification. Imports are generally taxed at the following rates, unless specifically exempted:

• Capital machinery: one per cent

• Basic raw materials: five per cent

• Intermediate raw materials and semi-finished products: 10 per cent

• Finished products: 25 per cent

Exports are generally exempt from customs duties

Supplementary Duty

Supplementary duty is levied on luxury goods imported into Bangladesh as well as non-essential or socially undesirable goods produced and supplied in the country. The rates vary from 10 to 500 per cent depending on the nature of the goods.

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